U.S. DEPARTMENT OF HOMELAND SECURITY, et al.

[Pages:25]Case 1:17-cv-01912-JEB Document 29 Filed 12/01/17 Page 1 of 25

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

NATIONAL VENTURE CAPITAL ASSOCIATION, et al.,

Plaintiffs,

v.

ELAINE DUKE, Acting Secretary, U.S. DEPARTMENT OF HOMELAND SECURITY, et al.,

Defendants.

Civil Action No. 17-1912 (JEB)

MEMORANDUM OPINION Elections have consequences. But when it comes to federal agencies, the Administrative Procedure Act shapes the contours of those consequences. This case involves the Department of Homeland Security's decision to delay the implementation of an Obama-era immigration rule, the International Entrepreneur Rule, 82 Fed. Reg. 5,238 (Jan. 17, 2017). The Rule would have allowed certain foreign entrepreneurs to obtain immigration "parole" -- that is, to temporarily enter the United States despite lacking a visa or green card. It was finalized in the waning hours of the Obama administration and was set to take effect 180 days later, on July 17, 2017. On the eve of that date, however, the Department issued a new rule ("the Delay Rule") delaying the effective date of the original one for another eight months, until March 14, 2018. The agency did so, however, without providing notice or soliciting comment from the public, as the APA generally requires. Plaintiffs brought suit, alleging that the agency lacked good cause to dispense with the APA's strictures and that the Delay Rule was therefore invalid. Having now reviewed both sides' Motions for Summary Judgment, the Court agrees and will vacate the Delay Rule.

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I. Background The controversy boils down to two competing rules. The first would have allowed

certain foreign entrepreneurs to temporarily enter the United States. The second, promulgated six months later, delayed that rule from taking effect. The Court discusses each in turn and then briefly recounts this suit's procedural history.

A. The International Entrepreneur Rule The Department of Homeland Security promulgated the International Entrepreneur Rule ("IE Final Rule") to "encourage international entrepreneurs to create and develop start-up entities with high growth potential in the United States." 82 Fed. Reg. at 5238. The Department believed that attracting foreign entrepreneurs would "benefit the U.S. economy through increased business activity, innovation, and dynamism." International Entrepreneur Rule, 81 Fed. Reg. 60,129, 60,131 (Aug. 31, 2016) (Notice of Proposed Rulemaking). Before the issuance of the regulation, foreign entrepreneurs lacked a clear-cut avenue for entry into this country. Id. at 60,151-52 & n.52 (citing Nina Roberts, For Foreign Tech Entrepreneurs, Getting a Visa to Work in the U.S. is a Struggle, The Guardian (Sept. 14, 2014)). The United States had no dedicated visa category for foreign entrepreneurs, and other visa options were frequently unavailable to that group. Id. The executive branch, however, cannot unilaterally create a new visa category, see 8 U.S.C. ? 1101(a)(15), so it turned to a more temporary solution for immigrant entrepreneurs: parole. See 82 Fed. Reg. at 5,244. "Parole" -- the French source of which term derives from giving one's word -- allows a foreign national to be physically present in the United States for a specific, temporary period, ranging from days to years. See, e.g., Leng May Ma v. Barber, 357 U.S. 185, 190 (1958). Unlike visas, parole is not an admission to the United States and gives a

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recipient no formal immigration status. See 8 U.S.C. ?? 1101(a)(13)(B), 1182(d)(5)(A). The Immigration and Nationality Act (INA) instead grants the Secretary of Homeland Security the discretionary authority to parole individuals into the United States on a case-by-case basis. Id. ? 1182(d)(5)(A). DHS views that power as "expansive." 82 Fed. Reg. at 5243. Although it may grant parole only for urgent humanitarian reasons or in cases of "significant public benefit," Congress has defined neither term. Id. at 5,242-43; see also 8 U.S.C. ? 1182(d)(5)(A).

In promulgating the IE Final Rule, DHS latched onto the latter criterion. It sought to provide guidance for its line-level adjudicators as to when parole for foreign entrepreneurs would provide a "significant public benefit" to the country. See 82 Fed. Reg. at 5,239. As the agency explained, adjudicating applications for that group often proved complex, so it "decided to establish by regulation the criteria for the case-by-case evaluation" of their applications. Id. at 5,238. The agency also established "application requirements that are specifically tailored to capture the necessary information for processing parole requests on this basis." Id. In so doing, DHS expected "to facilitate the use of parole" for foreign entrepreneurs and provide a "transparent framework" by which it would exercise its discretion. Id.

To be "considered for a discretionary grant of parole" under the Rule, an entrepreneur "would generally need to demonstrate the following":

1. The applicant must have formed a new start-up entity in the United States within 5 years of the application;

2. The applicant must a) possess at least a 10% ownership interest in the business; and b) "have an active and central role" in its operations and future growth; and

3. The applicant must validate the business's potential "for rapid growth and job creation" by showing a) it has received at least $250,000 from established U.S. investors; or b) it has received at least $100,000 in grants from government entities.

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Id. at 5,239. The Rule also created "alternative criteria" for meeting the final prong. Id. If an alien partially met one of the investment thresholds, she could provide "additional reliable and compelling evidence" of her company's potential for rapid growth and job creation. Id.

Applicants who met the criteria (along with spouses and minor children) could be considered for discretionary parole of up to 30 months. Id. Those individuals could also apply for re-parole for up to 30 additional months if they met certain conditions. Id. at 5,240. Importantly, however, satisfying the above criteria did not guarantee parole. Rather, the IE Final Rule streamlined the agency's treatment of entrepreneurs and guided how it would interpret the "significant public benefit" prong of the test. Agents would still need to assess applications on a case-by-case basis and retained the ultimate discretion as to whether to approve parole. Id. at 5,239. In making such discretionary determinations, USCIS would consider all relevant information, including any criminal history or other serious adverse factors that could weigh against admission. Id. DHS, moreover, retained its authority to terminate parole at any time, consistent with existing regulations. Id. at 5,243. In such cases, the individual would be "restored to the status that he or she had at the time of parole." Id. (quoting 8 C.F.R. ? 212.5(e)); see also 8 U.S.C. ? 1182(d)(5)(A).

The agency solicited and received 763 comments on its proposed rule. See 82 Fed. Reg. at 5,244. In response, it meaningfully revised the final version, including changing the minimum investment amount, the definition of an entrepreneur, and the definition of a start-up entity. Id. at 5,244-5,273. This final rule was set to take effect July 17, 2017, 180 days from its publication in the Federal Register. Id. at 5,242. DHS determined that this 180-day period would give USCIS "a reasonable period to ensure resources are in place to process and adjudicate

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Applications for Entrepreneur Parole filed . . . under this rule without sacrificing the quality of customer service for all USCIS stakeholders." Id.

B. The Delay Rule Of course, times change and so do administrations. On January 25, 2017, President Trump issued an Executive Order targeting current immigration practice. See Border Security and Immigration Enforcement Improvements, Exec. Order No. 13,767, 82 Fed. Reg. 8,793 (Jan. 25, 2017). As relevant here, the Order announced that it "is the policy of the executive branch to end the abuse of parole" of aliens in the United States. Id. at 8,795. Section 11(d) of the Order required the Secretary of Homeland Security to "take appropriate action to ensure that parole authority under section 212(d)(5) of the INA (8 U.S.C. ? 1182(d)(5)) is exercised only on a caseby-case basis in accordance with the plain language of the statute, and in all circumstances only when an individual demonstrates urgent humanitarian reasons or a significant public benefit derived from such parole." Id. at 8,796. For the next six months, the Department stayed silent. Six days before the IE Final Rule would take effect, however, USCIS issued a superseding "Delay Rule." 82 Fed. Reg. 31,887 (July 11, 2017). This latter Rule postponed the International Entrepreneur Rule's effective date by eight months, to March 14, 2018. Id. at 31,887. DHS issued the Delay Rule, however, without offering the public advance notice or an opportunity to comment, claiming that there was good cause to jettison the APA's requirements on that score. Id. at 31,887-88. Instead, it provided a short window for comments only after the Delay Rule took effect. Id. at 31,887. DHS further indicated that, pursuant to the Executive Order, the agency was "highly likely" to rescind the IE Final Rule. Id. at 31,888. Its new Delay Rule was designed to bridge the gap,

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such that the Obama-era Rule would never take effect. Id. (seeking "to delay the IE Final Rule while DHS considers rescinding the rule").

C. Procedural Background Plaintiffs include two foreign nationals (Atma and Anand Krishna), two U.S. businesses (Omni Labs, Inc. and Peak Labs L.L.C., d/b/a Occasion), and the National Venture Capital Association, which is an organization of individuals who "frequently invest in businesses founded by foreign entrepreneurs." Pl. MSJ at 4. All claim that the Delay Rule has seriously injured their businesses or investments. Id. Two months after its issuance, Plaintiffs brought this suit challenging it as invalid, see Compl., ? 11, and moved for a preliminary injunction ten days later. See ECF No. 12. The Court held oral argument on the motion on October 20, 2017. In a conference call shortly thereafter, the parties agreed that there were no factual disputes for the Court to resolve, such that the case could be decided expeditiously on summary judgment. See Minute Order of October 25, 2017. Plaintiffs thus agreed to hold their motion for a preliminary injunction in abeyance in exchange for the Government's submitting its summary-judgment briefing on an expedited basis. Id. The Court now considers the parties' Cross-Motions for Summary Judgment. II. Legal Standard The parties have cross-moved for summary judgment on the administrative record. The summary-judgment standard set forth in Federal Rule of Civil Procedure 56(c), therefore, "does not apply because of the limited role of a court in reviewing the administrative record." Sierra Club v. Mainella, 459 F. Supp. 2d 76, 89 (D.D.C. 2006); see also Bloch v. Powell, 227 F. Supp. 2d 25, 30 (D.D.C. 2002), aff'd, 348 F.3d 1060 (D.C. Cir. 2003). "[T]he function of the district court is to determine whether or not as a matter of law the evidence in the administrative record

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permitted the agency to make the decision it did." Sierra Club, 459 F. Supp. 2d at 90 (quotation marks and citation omitted). "Summary judgment is the proper mechanism for deciding, as a matter of law, whether an agency action is supported by the administrative record and consistent with the [Administrative Procedure Act] standard of review." Loma Linda Univ. Med. Ctr. v. Sebelius, 684 F. Supp. 2d 42, 52 (D.D.C. 2010) (citation omitted), aff'd, 408 Fed. App'x 383 (D.C. Cir. 2010).

The Administrative Procedure Act "sets forth the full extent of judicial authority to review executive agency action for procedural correctness." FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009). It requires courts to "hold unlawful and set aside agency action, findings, and conclusions" that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. ? 706(2)(A). While the typical case proceeds as an "arbitrary and capricious" inquiry into agency action, 5 U.S.C. ? 706(2)(A), the Court need not articulate that standard here, as Plaintiffs have not raised any challenge to the Delay Rule under that provision of the APA. III. Analysis

Plaintiffs allege that the Delay Rule is invalid, as the agency promulgated it without adhering to the APA's notice-and-comment playbook. See 5 U.S.C. ? 533. Before reaching that dispute, however, the Court must first consider whether any Plaintiffs even have standing to press forward.

A. Standing Article III of the Constitution limits the jurisdiction of federal courts to actual "Cases" and "Controversies." U.S. Const., art. III, ? 2. But not just any dispute will do. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 559-61 (1992). A plaintiff must demonstrate that she suffers: 1)

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an injury-in-fact that is 2) caused by the conduct complained of and 3) "likely" to be "redressed by a favorable decision." Id. at 560-61 (quotations omitted). In a suit brought by multiple parties, only a single plaintiff must possess standing for a case to proceed. See, e.g., Animal Legal Def. Fund, Inc. v. Glickman, 154 F.3d 426, 429 (D.C. Cir. 1998). At oral argument, Plaintiffs submitted that two siblings, Atma and Anand Krishna, present their best bet on that count. See Transcript at 8:3-4. Agreeing, the Court begins and ends its standing analysis there.

The Krishnas are two foreign entrepreneurs who claim that they would have applied and qualified for parole under the International Entrepreneur Rule. See PI Mot., Declaration of Atma Krishna, ?? 7, 9. In May 2017, the two British nationals founded LotusPay, a U.S.-based start-up designed to help companies collect digital payments. Id., ?? 1-2, 5. Both play integral roles in the business -- Atma is the CEO, while Anand is the Head of Marketing -- and each owns more than a 10% stake in the company. Id., ?? 2, 9. They also allege (and the Government does not dispute) that they could demonstrate a "potential for rapid growth," as their business has already received $120,000 from qualified U.S. investors and was recognized by the renowned start-up incubator Y Combinator. Id., ?? 3-4. The Krishnas contend that the Delay Rule has injured them insofar as they have "lost the opportunity to apply for parole under the [IE Final] Rule." Without parole, they say, they will be unable "to remain in the United States on a long-term basis." Id., ? 10. Plaintiffs then attribute a litany of adverse consequences to that lost opportunity -- namely, that they will struggle to hire U.S.-based employees, obtain additional investment from U.S.-based investors, and launch their platform in the United States. Id.

For their part, Defendants argue first that "aliens outside the United States generally lack standing to challenge the Government's immigration decisions." Def. Opp. at 14. Their cited cases, however, relate either to justiciability (rather than standing) hurdles or decisions on

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